AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Bosna Reosiguranje d.d. Sarajevo (Bosna Re) (Bosnia and Herzegovina [BH]). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Bosna Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

Bosna Re’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), albeit with a somewhat limited buffer, following strong premium growth and the distribution of an extraordinary dividend in 2024. Investment risk remains the greatest source of capital consumption in BCAR, reflective of Bosna Re’s concentration in domestic assets, which exposes the company to the elevated levels of economic, political and financial system risks associated with BH. The ratings also consider Bosna Re’s relatively small capital base, which heightens the sensitivity of its risk-adjusted capitalisation to any shocks. Dependence on retrocession remains high; however, the associated elevated credit risk is mitigated partly by a stable retrocession panel of excellent credit quality.

Bosna Re has a track record of adequate operating performance, evidenced by a five-year (2020-2024) weighted average return on equity of 8.3%, supported by profitable underwriting and investment activities. Technical performance remained good in 2024, translating in a combined ratio of 95.8%, which was in line with the company’s five-year (2020-2024) weighted average of 94.8%. Investment results, albeit modest, have supplemented earnings consistently in recent years, with a five-year (2020-2024) weighted average investment yield of 2.7%. AM Best expects operating performance to remain adequate as Bosna Re continues to grow, supported by a cautious underwriting strategy, which focuses on careful risk selection and a comprehensive use of retrocession protection.

With high barriers to entry in BH, Bosna Re benefits from a dominant market position as the only domestic reinsurer licensed to write life and non-life reinsurance. The company remains the leading domestic reinsurer with a market share in the region of 75%, based on 2024 gross written premium (GWP). A partially offsetting rating factor is Bosna Re’s highly concentrated underwriting portfolio, with half of GWP derived from three cedants and only marginal geographic diversification.

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